2. DIVERSIFIED BUSINESSES

2.5 Business in Argentina

Carboclor S.A.

Founded in the 60s, it is controlled by ANCAP through ANCSOL S.A. which holds 74,26% of shares (the rest is traded in the Buenos Aires Stock Exchange, CARC). Located in Campana, 75 km north of the city of Buenos Aires, it occupies 32 hectares and has 30,000 cubic meters of storage tanks for internal production and 25,000 cubic meters for third party services. It has a port on the Paraná de las Palmas river where vessels up to 220 meters long operate, with a natural depth of at least 32 feet.

Its activities include the production of solvents and alcohols from oil refinery streams, the commercialization of products of its own production and produced by third parties and the provision of logistic, storage and port-associated services. With a dominating position within the market of oxygenated solvents in Argentina and a strong regional presence, it supplies 40% of the Brazilian isopropyl alcohol market and it is a key supplier for CABA, another ANCAP company in Uruguay.

Results of the fiscal year:

The total revenue for this fiscal year was USD 63 million, with a gross loss of about USD 5.2 million, considering the value of the dollar after the December devaluation.

Despite a 4.5% decrease in incomes from sales in regards to the previous fiscal year, the gross profits were 19% higher. Labor and financial costs as well as a considerable exchange rate lag which was corrected towards the end of the fiscal year all contributed decisively to a gross loss similar to that of the previous fiscal year.

Achieved goals:

The good operational performance from the last trimester of the previous fiscal year was consolidated, thereby making significant improvements in the conversion of raw materials and the mechanical availability of the plant, which still has idle capacity as there is not enough raw material in the local market.

Cost control has been strict and during this year there were significant savings in items the company could control, especially labor, sourcing activities and consumption of materials for operation and maintenance.

Regional positioning was maintained and strengthened by the development of a pharmaceutical grade line of isopropyl alcohol in Brazil, which is projected to have good penetration in 2016.

The mechanical assembly of four cylinders for storing liquefied petroleum gas, which will be functional half way through the first trimester of 2016.

Carboclor follows three main orientation axes:

industrial operations with maximum performance
advanced commercial development in the management of channels and the value chain, and
logistic development through supplier diversification policies and regional and local partnerships.

Goals:

To develop an alternative raw material supplier in order to increase the used capacity.
To maximize use of the dock.
To close logistic agreements with partners.
To restructure liabilities by extending expirations and improving rates while taking advantage of new international credit conditions expected for Argentina.
To support the three strategic axes and, specially, to develop commercial actions that enable a strengthening of the company's local position.
To extend the pharmaceutical line to other products and in other countries.
To maintain restrictive criteria regarding investments focusing on those suitable within the overall risk management policy.
Having managed to stabilize the implementation of the SAP, to focus on the development of projection and analysis modules as well as on risk and auditing tools.